Hero Honda, Oil & Natural Gas Lead Drop as India's Sensex Index Declines

India’s benchmark stock index fell, completing its first weekly slide in four weeks, led by Hero Honda Motors Ltd. after its quarter earnings fell short of analysts’ estimates.

Hero Honda, the nation’s biggest motorcycle maker, lost 3.2 percent after posting its first drop in quarterly profit in almost three years as higher raw material costs eroded gains from selling more two-wheelers. Oil & Natural Gas Corp., the largest energy explorer, fell after first-quarter net income declined 25 percent.

“Investors don’t have any patience for underperformance,” said Jagannadham Thunuguntla, chief strategist at SMC Capitals Ltd. in New Delhi. “Companies whose results have been weak are getting punished.”

The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 123.71, or 0.7 percent, to 17,868.29. The gauge lost 1.5 percent this week, its first drop in four weeks, trimming its monthly advance to 1 percent. The S&P CNX Nifty Index on the National Stock Exchange lost 0.8 percent to 5,367.60. The BSE 200 Index retreated 0.5 percent to 2,281.63.

Hero Honda dropped 3.2 percent to 1,814.85 rupees. Net income in the three months through June fell 1.7 percent to 4.92 billion rupees ($106 million). That was lower than the 5.8 billion-rupee average profit estimate in a Bloomberg survey of 26 analysts.

Increasing Expenses

Hero Honda’s spending on raw materials such as steel and rubber rose to 72 percent of its sales in the quarter, from 68 percent a year ago, Chief Financial Officer Ravi Sud said.

Oil & Natural Gas lost 0.5 percent to 1,240.7 rupees. Its first-quarter net income decreased 25 percent to 36.6 billion rupees from a year earlier. That compares with the 38.5 billion- rupee mean estimate of 16 analysts surveyed by Bloomberg.

Indian equity funds posted an eighth consecutive week of inflows and China stock funds recorded the biggest weekly intake since mid-April, Cambridge, Massachusetts-based EPFR Global, which tracks $13 trillion of assets, said in an e-mail today.

Overseas funds bought a net 6.53 billion rupees ($140.3 million) of Indian equities on July 28, raising total investments in the stocks this year to 432.6 billion rupees, according to the nation’s market regulator.

Inflows from overseas reached a record 834.2 billion rupees in 2009, exceeding the high set two years ago in local currency terms, as the biggest advance in 18 years lured foreign funds. They sold a record 529.9 billion rupees of shares in 2008, triggering a record annual decline.

The following were among the most active on the exchange:

Bank of Baroda (BOB IN) advanced 2.5 percent to 752.35 rupees. The state-owned lender was raised to “neutral” from “underweight” by JPMorgan Chase & Co. analysts led by Adarsh Parasrampuria, who cited the company’s first-quarter results, margins and asset quality.

Everest Industries Ltd. (EVI IN), a maker of asbestos cement products, jumped 7.6 percent to 250.9 rupees, the most since June 15, after saying first-quarter profit rose 64 percent to 155 million rupees.

GAIL India Ltd. (GAIL IN) decreased 3.2 percent to 438.5 rupees. The country’s monopoly natural gas distributor was cut to “hold” from “buy” by Girish Nair, an analyst at BNP Paribas, who cut his estimates for the company’s earnings amid a delay in gas supplies.

Hindustan Construction Ltd. (HCC IN) soared 4 percent to 133.85 rupees. The construction company that built a sea-link in Mumbai reported first-quarter net income rose 56 percent to 283.1 million rupees. The company also plans to raise as much as 20 billion rupees selling shares in unit Lavasa Corp.

India Cements Ltd. (ICEM IN) climbed 1.8 percent to 107.05 rupees. The building materials manufacturer plans to raise 3 billion rupees from sales of three- and five-year bonds, according to four people familiar with the matter. “We are planning a bond issue, however nothing has been fixed,” finance official V.M. Mohan said in a telephone interview.

KEC International Ltd. (KECI IN), a maker of power- transmission equipment, fell 1.7 percent to 506.75 rupees after posting a 35 percent drop in adjusted net income for the three months through June to 264 million rupees.

Lanco Infratech Ltd. (LANCI IN) rose 3.3 percent to 66.6 rupees. The construction company won an order from Maharashtra State Power Generation Co., also known as Mahagenco, for a 1,980 megawatt power plant.

Reliance Mediaworks Ltd. (RMW IN) gained 2.4 percent to 211.4 rupees. The film-service company controlled by billionaire Anil Ambani offered to buy a majority stake in Inox Leisure Ltd. (INOL IN) an Indian operator of movie theaters, for 120 rupees a share each, the Economic Times reported, citing two people close to the development it didn’t identify. The company denied the report in an e-mailed statement today. Inox soared 16 percent to 83.25 rupees.

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net.